[The fine against Midwest Oil of Minnesota is twice as large as any imposed on a company since 2001, when the state established a formula based on wholesale prices, fees and taxes to determine a daily floor for gas prices.]

Communism at work for you.

66
posted on 02/25/2006 6:19:06 AM PST
by ohhhh
( I pray the public school system collapses for the good of the children.)

[They note that unlike large chains, those stations often can't cushion below-cost gasoline with sales of other merchandise.] (In other words, it's designed to be a pro-competition move in an odd sort of way.)

It's the way that politicians undermine a free economy by making state control buisness laws that never work and will eventually destroy America's properity. Communism is what it is and athiest materialism always leads to poverty near as I can tell.

67
posted on 02/25/2006 6:30:51 AM PST
by ohhhh
( I pray the public school system collapses for the good of the children.)

Well, this thread is four months old, but I’m glad there is still interest in the topic. The “loss leader” argument was used for years to justify minimum-price laws pertaining to milk sales at convenience stores. I agree that the “loss leader” strategy can be profitable in the short run for a single firm as a means of attracting customers into the store who would otherwise shop elsewhere. However, it’s hard for me to see how this could be a profit-maximizing strategy in the long-run once competing firms react by meeting the lower price to entice their lost customers back into their stores. Since gas prices are required to be posted in almost every state, it’s easy for competitors to observe what prices other stations are charging and to react accordingly.

I’m old enough to remember the gas-price “wars” of the 1950’s in which gasoline retailers engaged in ultimately self-destructive rounds of price reductions in an unsuccessful (in the long run) attempt to gain market share and sell related products and services, like oil changes, tires, and batteries.

Whether or not there SHOULD be price floors is another matter for debate, but it would be easy to see how gas stations with little or no side sales would want them. They would be snuffed out by the big groceries and sundry retailers using gas as a loss leader. Lower their prices to match? Sure, till they run out of money.

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